FAR Outsourcing
Definition
FAR Outsourcing
FAR outsourcing concerns how United States federal acquisition rules govern work that a prime contractor passes down to its subcontractors. Consent to subcontract is the control point, and it turns supplier selection into something the government is able to review.
Commercial buyers choose suppliers freely — federal primes often do not.
Where a contract requires it, the government reviews and consents to particular subcontracts before they are placed. That converts a routine procurement decision into a contractual gate.
The alternative route is to have your purchasing system approved, which buys discretion in exchange for accepting periodic review of how you buy.
Key takeaways
- FAR Part 44 covers subcontracting policies and procedures for federal contracts.
- Consent to subcontract may be required before a prime places particular subcontracts.
- An approved purchasing system narrows consent to specifically identified subcontracts.
- $25 million in government sales triggers a purchasing system review determination.
How it works
The relevant rules sit in Part 44 – Subcontracting Policies and Procedures. It defines a subcontract as any contract entered into by a subcontractor to furnish supplies or services for performance of a prime contract or a subcontract.
That definition is broad on purpose — it reaches down the tiers rather than stopping at the prime’s immediate suppliers.
Consent requirements depend on your purchasing system. Under Subpart 44.2 – Consent to Subcontracts, a contractor with an approved purchasing system needs consent only for subcontracts the contracting officer specifically identifies.
Without approval the net is wider, catching cost-reimbursement, time-and-materials and labour-hour contracts, plus fixed-price subcontracts above stated thresholds.
One threshold is the greater of the simplified acquisition threshold or 5 percent of total estimated contract cost.
Purchasing system reviews follow the money — a determination of whether to conduct one is triggered at $25 million in government sales, and determinations are revisited at intervals of at least three years.
The contracting officer’s review is substantive rather than procedural. It must ensure a proposed subcontract is appropriate for the risks involved and consistent with current policy and sound business judgment.
| Situation | Consent position |
|---|---|
| Approved purchasing system | Only specifically identified subcontracts |
| No approved system, cost-reimbursement | Consent generally required |
| No approved system, time-and-materials | Consent generally required |
| Fixed-price above threshold | Consent required above stated limits |
| Below thresholds | Generally outside the consent requirement |
Security requirements ride alongside these rules. Where controlled unclassified information is involved, the requirements for non-federal systems are imposed through the same contractual machinery.
Examples
Federal subcontracting rules reshape supplier strategy in ways commercial buyers find unfamiliar, particularly around timing. What follows are arrangements where the label and the reality parted company.
A prime plans to move work offshore and discovers the subcontract requires consent. The commercial case was sound and the timeline was not.
A contractor secures purchasing system approval and gains real discretion. That approval becomes a competitive asset in its government outsourcing pipeline.
A company crossing $25 million in government sales faces a review determination. Growth triggered an oversight process nobody had planned for.
A prime replaces a subcontractor mid-performance without consent. The commercial logic was sound and the contract lifecycle outsourcing process had skipped a required step.
Related terms
Federal contracting vocabulary overlaps with commercial sourcing language while meaning something more constrained. Every term below carries one reading and an explicit edge against all the others.
- Government outsourcing: public sector contracting generally, which these rules regulate.
- Contract lifecycle outsourcing: managing contracts as a service, distinct from the rules themselves.
- Compliance outsourcing: buying regulatory capability, which does not remove a consent requirement.
- Vendor management outsourcing: running supplier assurance, where consent tracking belongs.
- Total contract value outsourcing: the commercial measure that thresholds are calculated against.
- Regulated outsourcing: sector rules layering above general acquisition regulation.
- Multi-vendor outsourcing: using several suppliers, each of which may need separate consent.
FAQ
What is FAR Part 44?
The part of the federal acquisition regulation covering subcontracting policies and procedures, including consent to subcontract and purchasing system reviews.
When is consent to subcontract required?
It depends on your purchasing system. With approval, only for specifically identified subcontracts; without it, for a wider range including cost-reimbursement contracts.
What is an approved purchasing system?
A contractor purchasing system the government has reviewed and approved, which narrows the subcontracts needing individual consent.
What triggers a purchasing system review?
$25 million in government sales triggers a determination of whether to conduct one, with determinations revisited at intervals of at least three years.
Does the definition of subcontract reach lower tiers?
Yes. It covers contracts entered into by a subcontractor to furnish supplies or services for a prime contract or a subcontract.
Can I change subcontractors freely?
Not where consent applies. Replacing a subcontractor without required consent is a contractual breach regardless of the commercial merits.
Start at Outsource Accelerator and read the consent rules before restructuring the supply chain.
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